Argus Coal Daily International

Coal market prices, news and analysis

Issue 14R-148 Friday 1 August 2014

News and Analysis

European physical prices undone by Russia
European benchmark coal prices lost momentum this week
rising by just 9/t from a week earlier after trading
volumes diminished as it became clear that Russias coal
industry would not be directly targeted by sanctions.
European-delivered prices registered a new threemonth high at the start of the week before pulling back
sharply when it became clear that EU member states had
stopped short of applying stage three sanctions which
would include trade restrictions against Russias coal
industry. Instead, the EU agreed on 29 July to sanctions
targeting state-owned banks, an arms embargo and sales
of sensitive technology and the export of equipment for
the country's oil industry. The moves are designed to
encourage Moscow to withdraw support for pro-Russian
separatists in eastern Ukraine.
Prices rose by $2.10/t, or 2.77pc, on 28 July their
highest since 1 April ahead of the decision but the news
that Russian producers could continue to trade with the
EU removed support from prices and led to a rapid $2.21/t
drop from the three-month peak on 28 July.
The weekly API 2 index closed at $76.09/t, up by just
9/t on the week. The fourth-quarter swaps contract has
lost $1.60/t since the beginning of the week, and settled at
$76.20/t today.
Only 450,000t index-relevant deals were booked for
delivery to Europe. This is just one-third of the 1.3mn t of
index-relevant shipments booked last week.
But there are signs that the efforts by the EU and
US are impacting trade with Russia. The trading arm of
French state-controlled utility EdF and an undisclosed
Swiss trading firm last week cancelled the delivery of
at least two Panamax cargoes from Russian producer
Zarechnaya, after the US imposed sanctions on the
managing company Uralvagonzavod, a Russian state-owned
railcar manufacturer, multiple market sources told Argus.
Zarechnaya exports over 4mn t of coal to Europe.
The UK and Germany are more reliant on Russian coal
than any other EU country. The UK imported 19.1mn t
of Russian coal last year, making up 44.6pc of the UK's
total thermal coal imports of 43mn t, spending just under
$1.1bn. The UK imported just under 9mn t in the first five

Copyright 2014 Argus Media Ltd

prICES
International coal
Energy

Basis

$/t
Sulphur

Days Port

Price

+0.42

Europe
6,000 kcal

NAR

<1%

90 cif ARA

75.65

6,000 kcal

NAR

<1%

90 fob Richards Bay

70.57

-0.14

5,500 kcal

NAR

<1%

90 fob Richards Bay

62.81

+1.82

South Africa

Black Sea and Mediterranean

6,000 kcal

NAR

<1%

20 cif Marmara

92.75

nc

6,000 kcal

NAR

<1%

60 cif Iskenderun

80.50

nc

6,000 kcal

NAR

<1%

90 fob Baltic ports

70.00

nc

6,000 kcal

NAR

<1%

90 fob Vostochny

76.00

nc

6,700 kcal

ADB

<1%

90 cif Japan

82.94

+2.00

6,700 kcal

ADB

<1%

90 cif South Korea

79.48

-0.05

6,000 kcal

NAR

<1%

90 fob Newcastle

69.39

+1.85

5,500 kcal

NAR

<1%

90 fob Newcastle

55.76

+0.37

5,800 kcal

NAR

<1%

90 fob Qinhuangdao

85.65

+0.74

77.73

+0.07
-0.60

Asia-Pacific

5,500 kcal

NAR

<1%

Qinhuangdao
90 fob
domestic

5,500 kcal

NAR

<1%

90 cfr south China

65.47

6,000 kcal

NAR

<1%

60 cfr south China

74.90

nc

5,500 kcal

NAR

<1%

90 cfr east India

70.25

+0.05

5,000 kcal

GAR

<1%

90 cfr east India

59.49

+0.33

4,200 kcal

GAR

<1%

90 cfr east India

44.52

+0.33

6,500 kcal

GAR

<1%

90 fob Indonesia

73.28

-0.55

5,800 kcal

GAR

<0.8%

90 fob Indonesia

63.32

-0.13

5,000 kcal

GAR

<0.6%

90 fob Indonesia

51.16

+0.02

4,200 kcal

GAR

<0.4%

90 fob Indonesia

36.55

+0.21

3,400 kcal

GAR

<0.2%

90 fob Indonesia

23.78

+0.13

11,300 Btu

GAR

<1%

90 fob Puerto Bolivar

69.15

+0.40

12,000 Btu

GAR

<1%

90 fob Hampton Roads

85.50

nc

6,000 kcal

NAR

<1%

90 fob Hampton Roads

81.50

nc

11,300 Btu

GAR

<3%

90 fob New Orleans

58.00

nc

6,000 kcal

NAR

<1%

90 fob New Orleans

78.50

nc

Americas

Contents
Falling physical drags API 4 swaps lower
Australian prices find support
Rotterdam coal imports fall in July
Inaction eases Turkish supply fears
India targets policy changes to boost output

3
6
6
7
8

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

months of this year, and is expected to increase imports to

replace lost domestic output following the closure of UK
Coals deep pit mines.
Germany imported 11.8mn t of Russian coal last year,
accounting for 23pc of total coal imports of 50mn t.
South African physical spot prices continued to trade
at a discount to Europe, but the differential narrowed as

price falls on API 2 outpaced those on API 4. South Africa

started the week at a discount of $5.13/t to Europe, which
narrowed to $3.08/t by midweek. At the close of the week
the differential had again widened to $4.30/t. Spot trade
remained subdued, with just three 50,000t August deals
done this week. The API 4 weekly index closed at $71.79/t,
up by 59/t on the week.

Trades - Europe (cif ARA)

Volume

Price

Delivery
period

28 Jul 14

50,000

78.00

28 Jul 14

50,000

28 Jul 14

50,000

29 Jul 14

50,000

29 Jul 14

50,000

30 Jul 14

50,000

31 Jul 14
1 Aug 14
1 Aug 14

Date

Buyer

Seller

EFP

Broker

Index relevant

Sep 2014

No

GlobalCoal

Yes

77.50

Sep 2014

No

GFI

Yes

78.40

Oct 2014

Yes

GlobalCoal

Yes

74.00

Aug 2014

No

GlobalCoal

Yes

78.10

Oct 2014

No

Atlantic

Yes

74.00

Sep 2014

No

GlobalCoal

Yes

50,000

74.75

Oct 2014

No

GlobalCoal

Yes

50,000

75.00

Oct 2014

No

GlobalCoal

Yes

50,000

76.50

Sep 2014

No

GlobalCoal

Yes

EFP

Broker

Index relevant

Trades - South Africa (fob Richards Bay)

Volume

Price

Delivery
period

31 Jul 14

50,000

70.25

Aug 2014

No

GlobalCoal

Yes

31 Jul 14

50,000

70.25

Aug 2014

No

GlobalCoal

Yes

1 Aug 14

50,000

70.25

Aug 2014

No

GlobalCoal

Yes

Date

Argus cif ARA spot coal asessment

Buyer

$/t

Seller

Argus Richards Bay spot coal assessment

95

90

90

85

85

80

80

75

75

70

70
25 Jul 13

25 Nov 13

Copyright 2014 Argus Media Ltd

28 Mar 14

01 Aug 14

65
25 Jul 13

Page 2 of 10

25 Nov 13

28 Mar 14

$/t

01 Aug 14

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Swaps
Forward prices
Timing

$/t
Buy

Sell

Average

September

75.80

76.30

76.05

na

4Q14

75.95

76.45

76.20

nc

1Q15

76.95

77.45

77.20

nc

2Q15

77.40

77.90

77.65

-0.05

cif ARA (Rotterdam) API 2

3Q15

78.65

79.15

78.90

-0.15

4Q15

80.05

80.55

80.30

na

2015

78.25

78.75

78.50

-0.05

2016

81.75

82.25

82.00

-0.05

2017

83.80

84.30

84.05

-0.10

fob Richards Bay South Africa API 4

September

71.25

71.75

71.50

na

4Q14

72.00

72.50

72.25

-0.20

1Q15

73.15

73.65

73.40

-0.35

2Q15

73.40

73.90

73.65

-0.30

3Q15

74.40

74.90

74.65

-0.20

4Q15

75.45

75.95

75.70

na

2015

74.15

74.65

74.40

-0.15

2016

77.40

77.90

77.65

-0.05

2017

79.50

80.00

79.75

-0.10

4.30

4.80

4.55

+0.15

API 2 premium to API 4

Prompt

South Africa to Europe, implied freight rate

4Q14

3.90

4.00

3.95

+0.20

1Q15

3.75

3.85

3.80

+0.35

2Q15

3.95

4.05

4.00

+0.25

3Q15

4.20

4.30

4.25

+0.05

4Q15

4.55

4.65

4.60

na

2015

4.05

4.15

4.10

+0.10

2016

4.30

4.40

4.35

nc

2017

4.25

4.35

4.30

nc

Forward prices
Timing

$/t
Midpoint

cfr south China 5,500 API 8

September

66.60

+0.05

October

67.60

na

4Q14

68.25

+0.30

1Q15

69.40

+0.20

2Q15

70.30

+0.20

3Q15

70.60

na

2015

70.70

+0.25

Copyright 2014 Argus Media Ltd

Falling physical prices drag API 4 swaps lower

Prices in the South African paper market fell by 5-50/t
across the curve today, dragged lower by weaker physical
prices.
The greatest losses were seen at the front of the
curve. September today became the prompt month and
the contract lost 50/t on the day to close at $71.50/t.
South African physical prices have rallied in the last couple
of weeks, tracking the rise of API 2 which increased on
the expectation that the EU would impose wide-ranging
sanctions against Russia.
But the new sanctions did not target the Russian coal
industry directly, and South African prices have since fallen
back towards the $70/t mark. Todays daily fob Richards Bay
assessment came in at $70.57/t, $2.13/t lower than the price
at the start of the week.
Losses at the back of the curve were less severe in the
API 4 swaps market, suggesting the contango is likely to
begin to widen. The calendar 2015 contract lost just 15/t
to close at $74.40/t, widening its premium to the prompt
month to $2.90/t. The contango had stood at $4.30/t on 16
July, the day before a Malaysian Airlines plane was allegedly
shot down by pro-Russian rebels. But the prompt month
contract then rose more steeply on the threat of Russian
sanctions, and the contango narrowed to $2.20/t on 30 July.
In the European physical market, prices rose as two
50,000t cargoes traded. The first shipment, for September
delivery, priced at $76.50/t des Rotterdam, $2.50/t higher
than a September deal done on 30 June. On the follow,
an October cargo traded at $75/t des Rotterdam, 25/t
higher than an October deal done yesterday. The daily cif
ARA assessment came in at $75.65/t, 42/t higher than
yesterdays price.

Swaps vs physical API 2

79
78
77
76
75
74
73
72
71
70
04 Apr 14

Page 3 of 10

Swaps

16 May 14

$/t
Physical

25 Jun 14

01 Aug 14

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Generating costs
UK spark spreads

Germany spark spreads

Country

Power
Coal
Gas
Fuel oil

Price

Spark Spread Conversion

Country

/MWh

UK

37.30

$/MWh

equivalent

62.78

$/t

Rotterdam

75.65

$/MWh

equivalent

10.84

34.25

38%

p/th

NBP

40.53

$/MWh

equivalent

23.27

15.41

49.13%

$/t

Rotterdam

595.25

$/MWh

equivalent

49.72

-68.06

38%

Power
Coal
Gas
Fuel oil

Price

Spark Spread Conversion

/MWh

Germany

34.50

$/MWh

equivalent

46.34

$/t

Rotterdam

75.65

$/MWh

equivalent

10.84

17.81

38%

/MWh

Gaspool

17.68

$/MWh

equivalent

23.74

-1.98

49.13%

$/t

Rotterdam

577.50

$/MWh

equivalent

48.24

-80.60

38%

UK spark spreads for varying degrees of power station efficiency

Commodity
Fuel type

Spark spreads at varying conversion rates (/MWh)

Electricity, month-ahead
(/MWh)

Fuel (/MWh)

0.34

0.38

0.491

0.55

Base load
13.83

37.30

-3.37

0.91

9.15

12.16

Carbon credits

Month-ahead gas, NBP

2.06

37.30

-6.35*

-1.75*

7.09*

10.32*

Coal, cif ARA

6.44

37.30

18.35

20.35

24.19

25.59

Carbon credits

4.50

37.30

13.32*

15.85*

20.71*

22.48*

Peak load
Month-ahead gas, NBP

13.83

41.00

0.33

4.61

12.85

15.86

Carbon credits

2.06

41.00

-2.65*

1.95*

10.79*

14.02*

Coal, cif ARA

6.44

41.00

22.05

24.05

27.89

29.29

Carbon credits

4.50

41.00

17.02*

19.55*

24.41*

26.18*

German spark spreads for varying degrees of power station efficiency

Commodity
Fuel type

Spark spreads at varying conversion rates (/MWh)

Fuel (/MWh)

Electricity, month-ahead
(/MWh)

17.68

34.50

-17.48

-12.01

-1.48

2.36

2.58

34.50

-21.22*

-15.35*

-4.06*

0.06*

0.34

0.38

0.491

0.55

Base load
Month-ahead gas, Gaspool
Carbon credits
Coal, cif ARA

8.07

34.50

10.76

13.26

18.07

19.82

Carbon credits

5.64

34.50

4.46*

7.62*

13.71*

15.93*

Peak load
Month-ahead gas, Gaspool

17.68

40.25

-11.74

-6.26

4.27

8.11

2.58

40.25

-15.47*

-9.60*

1.69*

5.81*

Carbon credits
Coal, cif ARA

8.07

40.25

16.51

19.01

23.82

25.57

Carbon credits

5.64

40.25

10.20*

13.37*

19.46*

21.68*

*clean spark spread

UK spark spreads

70

$/MWh
Coal

Gas

30

60

Coal

$/MWh
Gas

20

50

10

40

30

-10

20

-20

10
0
25 Jul 13

German spark spreads

25 Nov 13

Copyright 2014 Argus Media Ltd

28 Mar 14

01 Aug 14

-30
25 Jul 13

Page 4 of 10

25 Nov 13

28 Mar 14

01 Aug 14

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Shipping costs
Spot freight to Rotterdam
Port

$/t

Country

Rate

Asia-Pacific freight analysis (Panamax 60,000t size)

Cape

$/t

Freight Delay Delivery Delivered Landed

Origin

Destination

rate (days)

cost 1

cost 2

cost 3

Richards Bay

South Africa

7.90

nc

Australia

Japan

13.55

14.14

83.53

Puerto Bolivar

Colombia

7.80

-0.05

Australia

S Korea

13.35

13.94

83.33

82.74

Indonesia 6,500 kcal Japan

6.30

6.30

79.58

79.58

Indonesia 5,800 kcal Japan

6.30

6.30

69.62

69.62

Indonesia 5,800 kcal S Korea

6.20

6.20

69.52

69.52

Indonesia 5,800 kcal China

5.25

5.25

68.57

68.57

Indonesia 5,000 kcal S Korea

6.20

6.20

57.36

57.36

Indonesia 5,000 kcal China

5.25

5.25

56.41

56.41

Indonesia 4,200 kcal India

7.40

7.40

43.95

43.95

Indonesia 4,200 kcal China

5.25

5.25

41.80

41.80

Indonesia 3,400 kcal India

7.40

7.40

31.18

31.18

Panamax
Richards Bay

South Africa

12.10

nc

Puerto Bolivar

Colombia

11.80

nc

Murmansk

Russia

5.60

nc

Other spot freight

$/t

Route/Size

Rate

East coast Australia to south China 150,000t

9.75

-0.65

Richards Bay to south China 150,000t

12.10

nc

Richards Bay to Krishnapatnam 150,000t

10.00

-1.00

Richards Bay-Rotterdam, Capesize

$/t

(1) Delivery cost = Argus freight rate plus demurrage delays at load port plus
bunker costs for the specific voyage
(2) Delivered cost = Delivery cost plus cost of coal
(3) Landed cost = Argus freight rate plus cost of coal

Australia to south China, Capesize

15

18

14

16

13
12

14

11

12

10
9

10

8
25 Nov 13

28 Mar 14

Puerto Bolivar to Rotterdam, Capesize

01 Aug 14

$/t

20

8
25 Jul 13

25 Nov 13

28 Mar 14

Puerto Bolivar to Rotterdam, Panamax

01 Aug 14

$/t

20
19

18

18

16

17

14

16
15

12

14
13

10

12

8
6
25 Jul 13

$/t

20

16

7
25 Jul 13

82.94

11
25 Nov 13

Copyright 2014 Argus Media Ltd

28 Mar 14

01 Aug 14

10
25 Jul 13

Page 5 of 10

25 Nov 13

28 Mar 14

01 Aug 14

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Coal Market News

Australian prices find support
Australian thermal coal prices gained ground this week,
driven by hopes of increased buying by India.
Prices of 5,500 kcal/kg coal sold on a fob Newcastle
basis edged up by 37/t to $55.76/t. A Panamax cargo
of high-ash Australian coal was sold at $56.50/t, while
a Capesize shipment was traded at the same price for
October delivery. Another Capesize cargo was done at
$55.05/t for delivery in August.
But price momentum stalled as the index tracked events
in Europe. Concerns that European Union sanctions against
Russia may force buyers in the economic union to seek
alternative sources of coal, had been supportive of South
African prices. But increases were undermined later in the
week after the EU disclosed that sanctions would not target
Russian coal exports directly.
Prices of 6,000 kcal/kg coal on a fob Newcastle basis rose
by $1.85/t to $69.39/t, pushed higher by an onscreen trade
for an August-loading 60,000t cargo at $69.75/t on 29 July.
Later in the week, a 25,000t cargo of 6,000kcal/kg material
traded at $68/t for September loading, while three similar
sized cargoes were done at $68.25-69/t for October.
Prices of 5,500 kcal/kg coal sold on a delivered basis to
south China fell by 60/t to $65.47/t, weighed down by a
deal done at $65.20/t for a Capesize shipment in September.
But market sentiment improved slightly after Chinese statecontrolled producer Shenhua announced possible plans to
reduce domestic coal production. The firm raised its selling
price for 5,500 kcal/kg domestic coal on a fob Qinhuangdao
basis by 4 yuan/t (65/t) to Yn479/t. Coal stocks at
Qinhuangdao port have dipped below the 7mn t level, falling
by about 240,000t over the week to 6.87mn t today.
API 8 swaps prices were supported as confidence
returned to the market, with prices rising by about 35-65/t
across the curve. The fourth-quarter contract rose by the
largest amount, amid expectations that demand will be
boosted by restocking and higher coal burn ahead of winter.
Prices of mid- and low calorific value coal sold on a fob
Indonesia basis strengthened, in line with firmer Australian
prices. But gains were mostly sentiment driven, with the
Indonesian market closed this week for the Eid al-Fitr
holidays. Indian buyers could come back into the market
from next week, when Indonesian businesses reopen, as coal
stocks at Indian power plants remain low. There were 46
Indian plants holding fewer than seven days of stocks on 30
July, with 23 of these plants having fewer than four days of
inventories. This compares with 42 and 23 respectively on
1 July. Prices of 3,800 kcal/kg coal posted the biggest gain,
increasing by 21/t to $36.55/t fob.
The arbitrage for Australian 5,500kcal/kg coal to east

Copyright 2014 Argus Media Ltd

coast India remains open, but has narrowed slightly following

the rise in Australian prices. Capesize freight rates for east
coast Australia-east coast India are at around $13.50/t,
compared with $11.75/t for the same size of vessel on the
Richards Bay-east coast India route. This gives Australian
coal a delivered price advantage of around $1/t over similar
specification South African cargoes.
Prices of 5,500 kcal/kg coal sold on a delivered basis to
east coast India edged higher by 5/t to $70.25/t. Delivered
prices of 4,600 kcal/kg and 3,800 kcal/kg sold on a cfr basis
to east coast India both increased by 33/t, to $59.49/t and
$44.52/t respectively. These were supported by gains in
Panamax freight rates, which have increased by around 15/t
to $7.40/t.

Rotterdam coal imports fall in July

Thermal coal imports to the port of Rotterdam dropped
markedly in July with only 11 coal vessels unloading during
the month compared with 19 in June.
Imports from Colombia showed the largest decline, with
only four vessels arriving compared with nine the previous
month. Imports from the US also dropped significantly, with
only two Panamax and one post-Panamax vessel unloading
in the month compared with six Panamax and one postPanamax in June.
The US became the principal source of Rotterdams
imports in April but was supplanted by Colombia in May as
exports from Puerto Drummond began to reach Europe.
Since then, it has remained the second largest source of
Rotterdam imports.
South Africa is the most distant coal supplier to Europe
and struggles to compete with the US and Colombia. South
African exports to Rotterdam remained almost flat monthon-month with just two vessels arriving in July compared
with one a month earlier.
Total imports to the port of Rotterdam fell in July, with
four fewer dry bulk vessels unloading as shipping enters a
seasonally slow summer period. This has also pushed freight
rates down with the cost of freight between Puerto Bolivar
and Rotterdam reaching $7.80/t.

Russian prices flat on weak demand

Prices for Russian coal in Europe remained unchanged from
last week amid low demand.
The price of 6,000 kcal/kg Russian coal stayed flat on
the week at $70/t fob Baltic ports. No index-relevant trades
were done this week. A Scandinavian cement producer
issued a tender for 10,000-15,000t of Russian coal. There
have been a few offers of Russian coal cargoes at $71-73/t,
but no deals were closed.

Page 6 of 10

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Coal Market News

Utilities continue to draw down well-stocked inventories
at northern Europes Amsterdam-Rotterdam-Antwerp (ARA)
ports, and consumption is not expected to pick up until
temperatures drop in the third quarter.
Freight rates for Panamax vessels from the Baltic Sea
ports of Ust-Luga, Ventspils and Riga to ARA was assessed at
$6/t, unchanged from last week.
In the Asia-Pacific market, the price for 6,000 kcal/kg
Russian coal was assessed at $76/t fob Vostochny, unchanged
from the previous week amid low demand for prompt
Russian coal deliveries on the Asian market.
A large Russian producer is refusing to sell its coal on
the spot market at current price levels, choosing instead to
stockpile it at a port in Russias far-east until prices firm.
Freight rates for Panamax vessels from the Russian far
eastern port of Vostochny to South Korea and Japan declined
by 40/t from last week to $3.60/t and $4.20/t respectively.
Rates from Vostochny to Taiwan and China decreased by
50/t to $4.10/t and $4.30/t respectively.

Inaction eases Turkish supply fears

A lack of coal sanctions against Russia have alleviated
concerns over the availability of Russian coal shipments
to Turkey, with Turkish prices now expected to slip back
following last weeks jump.
The US and EU on 30 July ended two weeks of
uncertainty by confirming new sanctions over Russias
involvement in Ukraine after the shooting down of Malaysian

Airlines flight MH17 in the east of Ukraine. But with the

energy-related impact of the sanctions largely confined to
oil exploration, it is unlikely that Russian coal exports will be
significantly affected.
The alleviation of supply concerns is expected to weigh
on Turkish coal prices, undoing last weeks $1/t jump to
$91-93/t cif Marmara, which was driven by uncertainty
over future shipments. Russian coal accounted for 41.1pc of
Turkeys thermal coal imports in 2013, with volumes totalling
8.57mn t.
The Turkish spot market is coming under further pressure
from sinking European delivered prices. The daily index
tumbled by nearly $3/t on 28-30 July to a 10-day low of
$74.88/t, as renewed supply confidence undermined last
weeks gains. Delivered prices have since edged up to
$75.65/t.
Trade remained subdued in the Turkish spot market this
week, with many market participants observing Ramadan
and Eid al-Fitr. But with Eid al-Fitr ending on 31 July, activity
is expected to pick up over the next week.

Low stock levels leave southern India exposed

Falling stock levels at Indias coal-fired plants and a weakerthan-usual monsoon has left the south of India particularly
exposed to energy shortages.
Combined stock levels at Indias 100 coal-fired power
plants are now touching record lows, after dipping below the
10mn t mark for the first time on 27 July. Stock levels stood

Russia
fob Baltic ports

70.00

fob Vostochny

76.00

United States
fob Hampton Roads 6,000 kcal

81.50

fob New Orleans 6,000 kcal

78.50

Asia

Europe
cif ARA

75.65

cif Marmara

92.75

cif Iskenderun

80.50

cfr south China 5,500 kcal

65.47

fob Qinhuangdao domestic

77.73

Australia
Colombia
fob Puerto Bolivar

Copyright 2014 Argus Media Ltd

69.15

South Africa
fob Richards Bay 6,000 kcal

70.57

fob Richards Bay 5,500 kcal

62.81

Page 7 of 10

fob Newcastle 6,000 kcal

69.39

fob Newcastle 5,500 kcal

55.76

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Coal Market News

at 9.93mn t on 30 July, 2.49mn t lower than a month ago and
12.1mn t lower than a year ago. Record-low levels resulted
in 46 of the countrys coal-fired plants only having enough
coal to run for less than seven days, and 23 of these are at
critical levels less than 4 days worth of coal remaining.
Coal stocks are particularly low in the south of the
country where five out of the regions 13 coal-fired plants
representing 9.13GW or 49pc of the regions coal-fired
capacity have less than four days of coal left. Only four
out of the 13 plants have more than 7 days of coal supplies.
In contrast, the shortages are less serious in the east of the
country where only 4 plants, representing just 20.6pc of the
regions coal-fired capacity, have less than four days.
And a weaker-than-normal monsoon means that
hydropower in the south of the country is unlikely to
offset any loss of coal capacity. The Indian meteorological
department estimates that rainfall has been 22pc lower in
the south than the long-term average, keeping the energy
content of the reservoirs in the region low.
Based on current water levels, the energy content of the
reservoirs in the south of India stood at just 5GW on 24 July.
This is 3.6GW or 41.5pc lower than on the same day last
year, and 10.8GW or 68.2pc less than the energy content of
the reservoirs when they are full. Hydropower in the south
has generated just 8122MU of electricity since 1 April, 9.3pc
less than was targeted.
Combined stock levels at south Indian coal-fired plants
stood at just 1.16mn t on 27 July and in order to return stock
at plants to normal levels, the region would need to source
5.19mn t of additional coal.
Coal supply in India has been under pressure as the
biggest domestic producer, state-controlled Coal India (CIL),
has struggled to meet its production targets. It produced
108.3mn t of coal in April-June, 5.3pc higher than the same
period last year but short of the target
And despite prices of international coal delivered to India
falling from the start of the year the price of 5,500 kcal/
kg NAR coal has fallen by $11.08/t or 13.6pc from the start
of the year to $70,20/t cfr India import volumes have
not been high enough to prevent stock levels from falling.
India imported 57.35mn t of coal in January-May this year,
10.35mn t or 15.3pc less than in the same period last year.

India targets policy changes to boost output

Indias new BJP government is considering new measures to
boost coal supplies as it seeks to avert widespread blackouts
caused by a lack of fuel reaching power plants.
The government may sell around 33mn t of coal to
generators at subsidised prices in the 2014-15 fiscal year

Copyright 2014 Argus Media Ltd

that started in April, rather than selling the coal through

electronic auctions at international prices. The initiative
could lead to an immediate increase in shipments to power
plants but is strongly opposed by dominant producer statecontrolled Coal India, which sold 58mn t through such
auctions in 2013-14. Coal India benefits from the higher
prices it receives through the auctions compared with sales
in the domestic market.
Delhi will also set up a panel of third-party quality
sampling agencies by September. This follows allegations
from utilities including state-run NTPC that Coal India
continues to supply coal cargoes that are bulked out by
stones. NTPC is demanding that cargoes are inspected at
unloading points, even after a sampling programme was
introduced in October.
And the coal ministry plans to make drastic changes to
the way coal areas are auctioned, as it looks to boost output
in the longer term. The planned changes come after a
recent auction was met with no response. The ministry will
now secure approvals for the block before seeking bids. The
development of many auctioned areas is delayed because of
problems with land acquisition and forest clearances.
Land acquisitions are the responsibility of states, and are
out of the hands of the central government unless it secures
the land before auctioning the blocks. But Delhi will be able
to expedite environmental approvals.
The government also plans to allow foreign mining firms
to take operational control of Coal Indias projects, a move
that is opposed by the company and unions. Coal India is
prepared to offer service contracts to foreign firms, but not
to cede control of operations.
A previous attempt to involve a foreign operator failed.
NTPC and Australia's Leighton Holdings are in arbitration
after the generator cancelled a mine development and
operation contract that was awarded to Leightons India unit
Thiess in November 2010. NTPC said the firm had failed to
make any headway in developing the Pakri-Barwadih coal
block in Jharkhand.
The government has set Coal India an output target
of 507mn t target in 2014-15, a 10pc increase from actual
output a year earlier. Coal India produced 462mn t in 201314, 20mn t short of a state-set target.
The firm produced 108.3mn t in April-June, up by 5.3pc
from a year earlier but 4pc short of its target. Supplies,
including coal from stockpiles, rose by 3.6pc from a year
earlier to 119.5mn t but fell short of targets because of
inadequate rail infrastructure and loading issues. Coal India
will raise output by 138mn t by March 2017, coal and power
minister Piyush Goyal said.

Page 8 of 10

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Coal Market News

Indo miners struggle with export economics
Small-scale Indonesian coal producers are struggling to
balance the economics of exporting thermal coal, as adverse
weather conditions thwart attempts to pull down unit costs,
and low seaborne prices persist.
Several mining firms have reported worsening project
economics, after heavy rainfall in the second quarter
hampered attempts to lower unit costs. Kalimantan-focused
producer Altura saw 913mm of rainfall at its operations over
April-June, which compares with just 566mm in the first
quarter of 2014.
Both Altura and mining firm Orpheus Energy saw their
operational performances dented by the wet conditions,
with Altura yesterday reporting that contractor productivity
remained below plan. Orpheus has struggled to achieve
economies of scale, with rainfall restricting output to just
3,258t over the second quarter.
Improving productivity is crucial to Indonesian coal
exporters remaining operational, while seaborne prices
continue to fall. Altura reported an average selling price (ASP)
of $43.35/t for its mid-rank thermal coal in April-June, down
from $44.82/t in the previous quarter. Orpheus reported a
2.8pc quarter-on-quarter price decline, achieving an ASP of
$37.50/t for its 4,200 kcal/kg material over April-June.
Weak seaborne prices have caused some Indonesian
firms to review their selling strategies, with Australia-listed
producer Realm Resources now focusing its attention more
heavily on the domestic market after its export ASP dropped
to around $36/t. In particular, the firm aims to sell output
from its 2.5mn t/yr Katingan Ria mine to state-owned utility
PLNs new 200MW power plant near Kasongan.
The loss of some Indonesian thermal coal exporters is
crucial to alleviating global oversupply, and to the recovery
of seaborne prices which are at multi-year lows. With the
Indonesian government so far failing to limit the countrys
output through regulation, it is expected that production will
be curtailed by cost pressures forcing mining firms to close
operations and sell off assets as they become unviable.
Orpheus last month confirmed that it has sold Indonesian
assets including coal worth around $8.2mn to various
parties, after they failed to generate sufficient profits. The
sale will result in a total profit to Orpheus of around $3.9mn.

Polands Weglowa sells coal mine

Polands largest producer Weglowa has sold one of its mines
to rival Polish producer Jastrzebska Spolka Weglowa (JSW)
to raise funds to turnaround its loss-making operations.
Weglowa secured 1.49bn zlotys ($479mn) for its KnurowSzczyglowice mine that has capacity to produce 3.8mn t/yr

Copyright 2014 Argus Media Ltd

including 2.4mn t/yr of thermal coal. The mine also produces

about 1.4mn t/yr of coking coal and is therefore a fit for the
coking-coal specialist, which plans to expand its capacity. JSW
last year produced 14.6mn t of coal and intends to increase its
output to 18.5mn t/yr from 2019 onwards.
JSW with a focus on coking coal is in a better
financial position than thermal coal specialist Weglowa.
The asset sale with JSW is the second for Weglowa since
2013 when it sold its stake in mines to Tauron electricity
producer. Weglowa was producing about 35mn t/yr of
thermal coal until recently, but currently is in the process of
downsizing output dramatically because of liquidity problems.
The funds from the JSW deal will provide Weglowa with a
lifeline to continue operations although the company recently
said the risk of bankruptcy remains a reality. The Polish
producer is struggling with increasing competition from lowcost imports and pressure on domestic coal prices.
Prices of Polish thermal coal edged up by 3.7pc in the
last two months, reaching nearly 250 zlotys/t ($83/t) in June,
after falling in April to the lowest level in 4 years. But the
price increase did not provide much comfort for Weglowa,
as stocks of unsold thermal coal in Poland reached a record
high of 8.6mn t at the end of June, according to figures from
Polands ARP agency which monitors coal mines. Weglowa
owns the overwhelming majority of unsold Polish inventory.
The company until recently was not able to sell coal from
stocks as they were blocked by banks as guarantees for the
companys debt.
The Polish firm is also being hit by rising imports, which
continue to increase despite overall decline of thermal coal
burn in Poland this year. Poland imported 3.3mn t of thermal
coal in January-May, 8pc more on the year. Imports from
Russia dominate at 3mn t in January-May, up by 28pc year
on year, according to ARP data. Polands end-users have
increased purchases of Russian coal despite its higher price
because of its higher calorific value, the better availability of
sized coal for households and favourable transport logistics,
as they can supply customers in northern and eastern Poland,
which are located far from domestic coal mines.

Guildford to sell Australian coal assets

Australia-listed Guildford Coal has agreed to sell its
Australian coal assets to Singaporean investment firm Sino
Construction for A$25mn ($23.25mn), although Guildford will
remain the sole manager of the assets it is selling.
The assets include the undeveloped thermal and
coking coal deposits Clyde Park, Pentland, Springsure and
Hughenden, located in the Galilee and Eromanga basins in
Queensland. Other assets include the Sunrise project in
the Surat basin in Queensland, the Monto project in the

Page 9 of 10

Argus Coal Daily International

Issue 14R-148 Friday 1 August 2014

Coal Market News

Nagoorin Graben basin, the Sierra project in the Bowen
basin and the Kolan project in the Maryborough basin.
Guildford has put the development of its Australian coal
assets either on hold, or dramatically slowed down their rate
of progress, since thermal and coking coal prices started
their downward trend three years ago. It has turned its
focus to Mongolia, where it is developing the Baruun Noyon
Uul coking and thermal mine in the South Gobi region, with
production expected to start before the end of the year.
The acquisition price will consist of $25mn payable by a
way of a non-interest bearing convertible promissory note,
which matures in six months after issue, Guildford said. A
royalty of 35/t of coal sold from all of Guildfords Australian
coal assets will be paid by Sino, with the royalty payable for
five years from the date at which coal production starts.
The deal is subject to Sino completing its due diligence,
as well as the relevant approval from regulatory authorities
being gained, Guildford said.

Argus Coal Daily International Methodology

Argus uses a precise and
transparent methodology to
assess prices in all the markets
it covers. The latest version of
the Argus Coal Daily International
Methodology can be found at:
www.argusmedia.com/methodology.
For a hard copy, please email
info@argusmedia.com, but
please note that methodogies
are updated frequently and for
the latest version, you should
visit the internet site.

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